Offshoring and Inflation / Diego A. Comin, Robert C. Johnson.

Format:

Book

Author/Creator:

Comin, Diego A.

Contributor:

National Bureau of Economic Research.

Johnson, Robert C.

Series:

Working Paper Series (National Bureau of Economic Research) no. w27957.

NBER working paper series no. w27957

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2020.

Summary:

Did trade integration suppress inflation in the United States? Conventional wisdom says "yes," based on the disinflationary supply-side impacts of trade. We argue that these supply-side arguments are incomplete, because trade integration also influences aggregate demand. Our analysis leverages two facts: trade integration was a long-lasting, phased-in shock, and offshoring accounts for a large share of it. Given these facts, we show trade integration is inflationary in conventional New Keynesian models. This result continues to hold when we account for US trade deficits, the pro-competitive effects of trade on domestic markups, and cross-sector heterogeneity in trade integration.

Notes:

Print version record

October 2020.